Following your second full year of retirement, your pension will be increased each year by an amount equal to at least 2/3 of the Consumer Price Index (CPI) to a maximum CPI increase of 4.0%.
Let’s look at an example. If the CPI increase is 4.0% in a year, your pension will increase by at least 2.67% (2/3 of 4.0%). If we use the same example as we used earlier, your actual increase totals $472.59 (2.67% x $17,700).
Note: If the Plan can afford it, you may receive increases of up to 100% of the CPI in a given year.
The actual size of the increase will depend on:
- the amount of your pension (including previous increases),
- the actual increase in the CPI for the year,
- the Plan’s funded status, and
- how long you have been retired.
- If you retire after May in a given year, for example, you will not receive any increase for that year. If you retire in May or earlier, you will receive a portion of that year’s increase.
In your second year of retirement, you will receive a larger portion of that year’s increase – again, depending on the month in which you retired.
After your second year of retirement, you’ll get the full increase payable each year.
Cost of Living Adjustment (COLA)
The Plan provides for a guaranteed cost of living increase to pensions in payment each year. The guaranteed COLA is equal to two-thirds of the increase in CPI to a maximum CPI increase of 4%. COLA increases are granted each July.
The Plan maintains a notional COLA account to determine if additional increases to pensions can be made. Each month, 10.2% of employee contributions, plus a matching amount, is credited to this notional account. The portion of benefit payments that related to past COLA increases is deducted from this account. Each year, an actuarial valuation is performed on this account to see if additional COLA increases can be granted.
In 2003, the balance in the COLA account was not sufficient to grant an additional increase, so retirees received a COLA increase of 2.56%, which was two-thirds of the CPI increase of 3.84%.
Past COLA increases account for approximately 18% of the pension benefits paid to retirees in 2003.